1) Which of the following is not considered a mainstream investment style?
a. Value
b. Growth
c. Market-oriented
d. Benchmark
e. Small-cap
2) Exhibit 8.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You expect the risk-free rate (RFR) to be 4 percent and the market return to be 10
percent. You also have the following information about three stocks.
Refer to Exhibit 8.7. What is your investment strategy concerning the three stocks?
a. Buy A and B, sell C
b. Sell A, B and C
c. Sell A and B, buy C
d. Buy A, B and C
e. Buy A and C, sell B
3) Exhibit 4.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Shares of RossCorp stock are selling for $45 per share. Brokerage commissions are 2%
for purchases and 2% for sales. The interest rate on margin debt is 6.25% per year. The
maintenance margin is 30%.
Refer to Exhibit 4.7. At the end of one year shares of RossCorp stock are selling for $35
per share and the company paid dividends of $0.85 per share. Assuming that you
borrowed 25% of cost of the purchase, what is your rate of return?
a.33.05%
b.-33.05%
c.-23.51%
d.-25.35%
e.-40.64%
4) A 5-year bond has a $1,000 par value bond, a 12% coupon and a yield to maturity of
8%. Interest is paid semiannually. The bond’s price is
a. $864.65
b. $1081.78
c. $852.80
d. $1162.22
e. None of the above
5) The option adjusted duration will approach the duration to maturity, when
a. Interest rates are significantly above the coupon rate because the option has very little
chance of being called, and the call option will have very little value.
b. Interest rates are significantly below the coupon rate because the option has very
little chance of being called, and the call option will have very little value.
c. Interest rates are significantly above the coupon rate because the option has a high
chance of being called, and the call option will have significant value.
d. Interest rates are significantly below the coupon rate because the option has a high
chance of being called, and the call option will have significant value.
e. None of the above.
6) Investments with predetermined contractual payments are known as:
a.Fixed-income
b.Real estate
c.Real assets
d.Equities
e.Low liquidity investments
7) An individual in the 36% tax bracket has $20,000 invested in a tax-exempt account.
If the individual earns 10% annually before taxes and inflation is 3.0% per year, what is
the real value of the investment in 10 years?
a.$31,000
b.$33,200
c.$38,614
d.$39,343
e.$47,823
8) Under the following conditions, what are the expected returns for stocks A and B?
a. 14.8% and 13.8%
b. 19.8% and 29.5%
c. 16.0% and 19.8%
d. 16.9% and 15.9%
e. None of the above
9) Exhibit 22.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
If the spot rate at expiration is $0.80 and the call option was purchased, what is the
dollar gain or loss?
a. $123 gain
b. $590 loss
c. $312 gain
d. $237 gain
e. $0
10) Exhibit 14.9
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The Rollerball Corporation’s industry averages are as follows:
Net Profit Margin = 7.5%; Total Asset Turnover = 2.2; Total Assets/Equity = 2.0
Rollerball Corporation has the following financial statements for year ending
12/31/2008. (000’s omitted)
Calculate Rollerball Corporation’s Total Assets/Equity ratio.
a. 3.57
b. 4.28
c. 5.61
d. 7.35
e. 9.81
11) Exhibit 11.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider a firm that has just paid a dividend of $1.5. An analyst expects dividends to
grow at a rate of 9% per year for the next three years. After that dividends are expected
to grow at a normal rate of 5% per year. Assume that the appropriate discount rate is
7%.
The present value today of dividends for years 1 to 3 is
a. $4.67
b. $3.08
c. $5.67
d. $4.5
e. $1.53
12) Exhibit 10.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You are provided with the following information for a company.
Calculate the cash conversion cycle.
a. 27
b. 46
c. 27
d. 55
e. 22
13) Exhibit 21.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
As a relationship officer for a money-center commercial bank, one of your corporate
accounts has just approached you about a one-year loan for $3,000,000. The customer
would pay a quarterly interest expense based on the prevailing level of LIBOR at the
beginning of each quarter. As is the bank’s convention on all such loans, the amount of
the interest payment would then be paid at the end of the quarterly cycle when the new
rate for the next cycle is determined. You observe the following LIBOR yield curve in
the cash market:
If 90-day LIBOR rises to the levels “predicted” by the implied forward rates, what will
the dollar level of the bank’s interest receipt be at the end of the second quarter?
a. $40,500.00
b. $38,250.00
c. $35,250.00
d. $37,064.25
e. None of the above